While many bitcoin investors look for the asset to behave as a safe haven, bitcoin typically has ultimately acted as the riskiest of all risk allocations.
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Looking at the rolling 3-month correlations of bitcoin CME futures versus a few of the risk-on indexes mentioned above, they all track nearly the same.
Although bitcoin has had its own, industry-wide capitulation and deleveraging event that rival many historical bottoming events we’ve seen in the past, these relationships to traditional risk haven’t changed much.
Bitcoin has ultimately acted as the riskiest of all risk allocations and as a liquidity sponge, performing well at any hints of expanding liquidity coming back into the market. It reverses with the slightest sign of rising equities volatility in this current market regime.
We do expect this dynamic to substantially change over time as the understanding and adoption of Bitcoin accelerates. This adoption is what we view as the asymmetric upside to how bitcoin trades today versus how it will trade 5-10 years from now. Until then, bitcoin’s risk-on correlations remain the dominant market force in the short-term and are key to understanding its potential trajectory over the next few months.
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